Policy Name:	WAGES
Policy #:	CP-23-01
Code/Rule Reference:	R.C. 4123.61, R.C. 4123.62, R.C. 4123.56(A)(E), R.C. 4123.03, Joint Resolution R80-7-48 Computation of full weekly wage
Effective Date:	09/29/17
Approved:	Kevin R. Abrams, Chief Operating Officer
Origin:	Claims Policy
Supersedes:	Wages policy CP-23-01 dated 10/10/14
History:	New 10/10/14

 

 

I. POLICY PURPOSE

 

The purpose of this policy is to ensure BWC calculates the full weekly wage (FWW) and the average weekly wage (AWW) consistently and in compliance with the law. 

 

II. APPLICABILITY

 

This policy applies to all BWC claims services staff.

 

III. DEFINITIONS

 

Allowances:  Payment of a set amount made to an employee at given intervals for a specific purpose.  Allowances are paid without requiring proof that the employee spent the allowance monies on the specific purpose. Common types of allowances include payment for travel, uniforms, laundry and housing. 

 

Average weekly wage (AWW):  Basis upon which to compute benefit payments for:  temporary total compensation and living maintenance compensation after the initial 12-week period of disability; death benefits; permanent total disability; percentage of permanent partial disability; wage loss compensation; and may be used for payment of living maintenance wage loss if greater than the FWW. 

 

AWW earning period:  The timeframe in which the injured worker’s earnings are used to calculate the AWW which is the 52 weeks prior to the date of injury or date of disability in occupational disease claims, excluding periods of unemployment beyond the injured worker’s control (including but not limited to sickness, industrial depression, strike, lockout)

 

Best available evidence:  For purposes of this policy, best available evidence is defined as the more detailed earnings information for the earning period (e.g., a payroll report from the employer is better evidence than a W-2).

 

Bonuses:  Payments made to an employee by an employer, which are in addition to regular earnings. 

 

Cafe 125:  Non-taxable money set-aside from earnings that is generally used for employee contributions towards health care, life insurance or daycare.

 

Deferred compensation deductions:  Deductions the employer makes from an employee’s pay that the employee can receive at some later date.

 

Deferred compensation account disbursements:  Retirement income paid from previously deferred funds. 

 

Earning period:  Period of time used to identify earnings to be included in the FWW and AWW wage calculations.  Earning periods are generally based on full pay periods prior to the date of injury or date of disability in occupational disease claims (e.g., 52 full weekly pay periods).

 

Employer contributions to employee health care plan:  Payments made by the employer toward the purchase of a health care plan for the employee

 

Foster child care payments:  Payments made to foster parents to cover the costs of care for a foster child. 

 

Frequency of earnings:  Schedule on which pay is received (e.g., weekly, biweekly, monthly).

 

Full weekly wage (FWW):  Basis for payment of compensation for the first 12 weeks of temporary total compensation or living maintenance compensation and may be the basis for living maintenance wage loss if it is greater than the AWW. 

 

FWW earning period: The timeframe in which the injured worker’s earnings are used to calculate the FWW.  The FWW is ordinarily based on the injured worker’s earnings when the injured worker has been continuously employed for six weeks or seven days prior to the date of injury or date of disability in occupational disease claims.

 

Living maintenance wage loss:  Compensation paid to an injured worker who has completed a vocational rehabilitation program and returns to employment, but suffers a wage loss compared to the wage the injured worker was receiving at the date of injury or date of disability in occupational disease claims.

 

Non-working wage loss:  The dollar amount of the diminishment in wages sustained by an injured worker who has not returned to work because he or she has been unable to find suitable employment.  The extent of the diminishment must be the direct result of physical and/or psychiatric restriction(s) caused by the impairment that is causally related to an industrial injury or occupational disease.

 

Per diem payments:  Payments made by the employer to the employee as a daily expense allowance. 

 

Reimbursements:  Payments made to an employee based on actual cost to the employee, and may require the submission of receipts to the employer (e.g., travel, uniforms, laundry and housing). 

 

Regular earnings:  For purposes of this policy, regular earnings are defined as the hourly rate times hours worked or a regular salary.

 

Retirement benefits:  Pay to an employee who has left employment due to reaching a specific age, or specific number of years of service, or at the election of the employee. 

 

Self-employment earnings:  Net income (income after expenses) an individual earns in association with certain types of solely-owned or partially-owned businesses. 

 

Severance pay:  Pay given to an employee upon termination of employment.

 

Social security benefits:  Payments made by the Social Security Administration to an individual because of retirement, death or disability. 

 

Stipends:  Allowance for daily living expenses paid by the employer. 

 

Tips:  Money given by a patron to a servant, waiter, or other similarly related individual for services rendered. 

 

Temporary total:  Compensation paid to an injured worker who is unable to return to the former position of employment on a temporary basis due to the work-related injury or occupational disease and who has not been found to have reached maximum medical improvement.

 

Unemployment benefits:  Benefits paid by the Department of Job and Family Services to an individual who has lost employment. 

 

Vacation pay:  Payment from an employer to an employee for a break or holiday from work. 

 

Working wage loss:  The dollar amount of the diminishment in wages sustained by an injured worker who has returned to employment which is not his or her former position of employment.  However, the extent of the diminishment must be the direct result of physical and/or psychiatric restriction(s) caused by the impairment that is causally related to an industrial injury or occupational disease. 

 

IV. POLICY

A.    It is the policy of BWC to identify the earning periods as follows:

1.    Generally, the earning periods for the calculation of wages shall be determined based on full pay periods prior to the date of injury, or date of disability in occupational disease claims.

a.    The earning period for the calculation of the FWW includes the higher amount of either:

i.      The six weeks of continuous employment prior to the date of injury or date of disability in occupational disease claims, including overtime pay; or

ii.     The seven days prior to the date of injury or date of disability in occupational disease claims excluding overtime pay.

b.    The earning period for the calculation of the AWW is the 52 weeks prior to the date of injury or date of disability in occupational disease claims.

2.    Earnings to be used for employers other than the employer of record shall be determined based on pay periods for that employer that fall within the 52-week earning period.

 

B.    It is the policy of BWC to calculate the FWW and AWW in a claim based on the best available evidence.

1.    It is the responsibility of the injured worker to provide earnings information for the calculation of wages.

2.    BWC shall request detailed earnings from the injured worker and employer of record for the 52 weeks prior to the date of injury or date of disability in occupational disease claims. Evidence of earnings include, but is not limited to:

a.    Payroll reports from an employer;

b.    Copies of check stubs;

c.     Income tax returns signed by the injured worker or signed by another person who prepared the taxes;

d.    W-2s for the year of and/or year prior to the date of injury or date of disability in occupational disease claims;

e.    1099 forms for the year of and/or year prior to the date of injury or date of disability in occupational disease claims when accompanied by an Injured Worker Earnings Statement (Wages-IW) form or equivalent statement regarding expenses;

f.      Social security reports of earnings that include the injured worker’s name;

g.    Employer Report of Employee Earnings (Wages-Emp) form or equivalent statement signed by the employer;

h.    Wages-IW form or equivalent signed by the injured worker.

                                  i.        BWC requires wages being reported as income to also have been reported to the Internal Revenue Service (IRS).

                                 ii.        If BWC suspects that wages reported as income have not been reported to the IRS, BWC may notify the IRS of any discrepancy (e.g., rental income, S-Corporation profits and partnership profits).

3.    BWC shall attempt to calculate wages:

a.    In all lost time claims;

b.    When a claim changes from medical only to lost time; or

c.     Upon receipt of an Application for Determination of Percentage of Permanent Partial Disability or Increase of Permanent Partial Disability (C-92). 

4.    BWC shall set both the FWW and the AWW when setting wages for compensation other than percentage of permanent partial disability (%PP).

5.    When setting the AWW for the purpose of paying %PP:

a.    BWC shall set the FWW and the AWW when detailed earnings information is available; or

b.    BWC shall set only the AWW when detailed earnings are not available. 

6.    BWC shall only set wages in a medical only claim upon a written request (e.g., Motion (C-86), Wages – IW or Wages – EMP) with attached supporting documentation. 

C.   BWC shall include the following earnings in the calculation of wages, however the list is not all-inclusive:

1.    Gross regular earnings, before deductions such as deferred compensation, Cafe 125, etc.;

2.    Tips;

3.    Self-employment earnings (e.g., Form 1040 Schedule C);

4.    Allowances;

5.    Bonuses related to direct and active participation in employment during the earnings period (e.g., performance bonus);

6.    Profit sharing related to work activity (e.g., earned based on hours worked, product produced or other earnings related to work activity);

7.    Working wage loss or living maintenance wage loss paid in a prior workers’ compensation claim (in addition to earnings from an employer);

8.    Per diem or stipend payments;

9.    Vacation, sick leave, and holiday pay for periods which fall within the earnings period;

10.  Lump sum payouts for vacation, sick, personal or other leave is included for AWW calculation only;

11.  Farm income (e.g., Form 1040 Schedule F);

12.  Earnings reported on the injured worker’s federal income tax return that are specifically subject to either social security withholding, Medicare withholding, or self-employment tax (e.g., housing allowance);

13.  Income specifically subject to self-employment tax (Schedule SE);

14.  Payment received in lieu of receiving health insurance.

 

D.   BWC shall exclude the following earnings in the calculation of wages, however the list is not all-inclusive:

1.    Bonuses unrelated to work activity (e.g., shareholder bonus, contract ratification);

2.    Profit sharing unrelated to work activity (e.g., owns stock, dividends);

3.    Disbursements from previously deferred compensation;

4.    Retirement benefits paid from social security or other retirement programs;

5.    Employer contributions to employee health care plans;

6.    Payment received for foster care of children;

7.    Non-working wage loss compensation paid in a prior workers’ compensation claim;

8.    Reimbursement for items such as travel, uniforms, etc.;

9.    Temporary total compensation or salary continuation, including occupational injury leave (OIL), paid in a prior claim;

10.  Unemployment benefits;

11.  Severance pay;

12.  Other forms of income reported on an injured worker’s tax return that are not subject to social security withholding, Medicare or self-employment tax, including, but not limited to:

a.    Interest income;

b.    Dividend income;

c.     Taxable refunds of state and local income taxes;

d.    Alimony received;

e.    Capital gains;

f.      Other gains reported on Form 4797;

g.    IRA distributions;

h.    Pension distributions;

i.      Income reported on Schedule E (including, but not limited to, rental real estate, royalties, partnerships, S corporations, trusts);

j.      Social security benefits;

k.     Other income not subject to self-employment tax (Schedule SE);

l.      Tuition reimbursement (1098T).

 

E.    Unemployment benefits and setting wages

1.    Periods during which an injured worker receives unemployment benefits are generally excluded from AWW calculation;

2.    Seasonal workers must demonstrate that they were looking for work during periods of unemployment.  Examples of ways an injured worker may demonstrate that he or she was looking for work include:

a.    A signed statement on the Wages-IW form or its equivalent which describes the job search activity, including type of work sought and method of job searches; or

b.    Copies of confirmation from on-line job searches; or

c.     Copies of correspondence with potential employers, job applications, resumes or other evidence of contact with employers.

3.    Weeks during which an injured worker participated in job training or job seeking skills training for which they were paid will be excluded and the payment will be excluded.  This does not include periods of job training with an employer. 

4.    Periods during which the injured worker received partial unemployment benefits while working, and the earnings for those periods, will be excluded if the injured worker provides evidence that he or she continued to seek work to return to full employment during that period in an attempt to discontinue receipt of the partial unemployment benefits.

 

F.    Calculating the FWW

1.    For injured workers who have been either continuously employed for six weeks prior to the date of injury or date of disability in occupational disease claims or worked at least seven days prior to the date of injury or date of disability in occupational disease claims, the FWW shall be the higher amount of either:

a.    The gross earnings, including overtime pay, for the six weeks prior to the date of injury or date of disability in occupational disease claims, divided by six; or

b.    The gross earnings, excluding overtime pay, for the seven days prior to date of injury or date of disability in occupational disease claims.

2.    For injured workers who have not been continuously employed for six weeks prior to the date of injury or date of disability in occupational disease claims and who have not worked for at least seven days prior to the date of injury or date of disability in occupational disease claims, the FWW is calculated by multiplying the hourly rate times the number of hours the injured worker was scheduled to work the week of the date of injury or date of disability in occupational disease claims.  

3.    BWC shall set the FWW equal to one-third (1/3) of the statewide average weekly wage for the date of injury or date of disability in occupational disease claims when the FWW cannot be determined in accordance with IV.F.1. or IV.F.2. above.

a.    In the event the FWW is later recalculated and determined in accordance with section IV.F.1. or IV.F.2. above:

i.      BWC shall adjust previously paid FWW compensation and pay out the difference; or

ii.     If the adjustment creates an excess amount paid to the injured worker, BWC shall set the injured worker overpaid.

b.    Refer to the Overpayment of Compensation policy and the Adjustment of Overpaid Compensation policy for additional information.

G.   Calculating the AWW

1.    The AWW is calculated by dividing the total earnings for the 52 weeks prior to the date of injury or date of disability in occupational disease claims by 52 minus any weeks which should be eliminated.

2.    Periods of unemployment due to reasons beyond the injured worker’s control shall be eliminated from the calculation.  Documentation is required to support eliminating weeks from the calculation.  Reasons to eliminate weeks include, but are not limited to: 

a.    Sickness of the injured worker or a family member whom the injured worker had to care for;

b.    Pregnancy or parental leave of the injured worker, excluding an extended period based on the injured worker’s choice instead of medical necessity;

c.     Industrial depression;

d.    Strike or lockout;

e.    Disability related to a prior workers’ compensation claim;

f.      Non-working wage loss compensation was paid in a prior workers’ compensation claim;

g.    Injured worker was unemployed, but was seeking employment (note additional requirements for seasonal workers in section IV.E.2 above);

h.    Injured worker is new to the work force (i.e., the IW recently graduated from high school or college).

3.    If the injured worker has not worked for reasons within his or her control (e.g., IW stayed home to care for children or to go to college), those weeks are generally not excluded from the calculation. 

4.    If the injured worker presents special circumstances that make the method described in the wages policy and procedures unfair, BWC may use an alternative method for setting wages to provide substantial justice.  BWC claims services staff may consult with a BWC attorney.

5.    BWC shall apply special circumstances when setting the AWW when it is appropriate.  Examples of situations where special circumstances may apply include when the injured worker was:

a.    New to the work force;

b.    Self-employed and suffered a loss of earnings due to an unsuccessful business; or

c.     A volunteer worker.

6.    BWC may set the AWW at $0.00 when no earnings for the 52 weeks prior to the date of injury or date of disability in occupational disease claims are submitted to BWC to support an AWW calculation. 

7.    BWC will not set wages without earnings information for the purpose of paying a percentage of permanent partial disability award as there is no minimum award for this benefit type.

8.    BWC will not set wages without earnings information for the purpose of paying wage loss compensation or living maintenance wage loss compensation as earnings information is required to prove a loss of earnings to be eligible for these benefits. 

 

H.   When it is within BWC’s jurisdiction, BWC shall issue an order to set or reset wages in a claim.

1.    BWC shall set the initial FWW and/or AWW in a claim. 

2.    BWC shall reset the FWW and/or AWW in a claim unless the Industrial Commission has previously ruled on the setting of wages. 

a.    BWC shall re-evaluate wages upon receipt of a request to reset wages on a Motion (C-86), Wages – IW or Wages - EMP or its equivalent which is accompanied by new evidence that is better than that which was used in the prior calculation of wages.

i.      If BWC’s evaluation results in a new FWW and/or AWW amount, BWC shall issue a BWC order to allow the request to reset the wages. 

ii.     If BWC’s evaluation results in no change to the FWW and/or AWW amount, BWC shall issue a BWC order to deny the request to reset the wages.

iii.    If a request is filed and the accompanying evidence is not better than the evidence previously used to set wages, BWC shall issue a BWC order to deny the request to reset the wages.

b.    BWC may adjust the FWW and/or AWW even when the written request is only for one or the other, but the evidence supports re-evaluation of both.

c.     BWC may issue a BWC order to reset the FWW and/or AWW when an error in the prior calculation is discovered.

 

I.      A request to reset the FWW and/or AWW in a claim where the Industrial Commission has previously ruled on the setting of wages shall be referred to the Industrial Commission with BWC’s recommendation regarding the resetting of wages.

 

J.     BWC shall make payment in accordance with a BWC or Industrial Commission order on wages as legally appropriate.

 

K.    BWC will adjust previously paid compensation when wages are reset and a BWC or Industrial Commission order has been issued which includes language that orders the adjustment of previously paid compensation.

1.    When an adjustment to wages is made based on a request from a party to the claim and the result of the adjustment is that additional payment is due to the injured worker, the adjustment will be limited to compensation paid within the two years prior to the filing date of the request.

2.    When an adjustment to wages is made by BWC without a request from a party to the claim and the result of the adjustment is that additional payment is due the injured worker, all compensation paid in the claim will be adjusted. 

3.    All compensation paid in the claim will be adjusted when the change in wages results in the injured worker being overpaid.  The amount of the overpayment will be determined after the order to reset the wages is final.  Refer to the Overpayment of Compensation policy and Adjustment of Overpaid Compensation policy for information regarding declaring and collecting an overpayment.

 

BWC staff may refer to the corresponding procedure for this policy entitled “Procedure for Wages” for further guidance.